A PROPOSED CONSTITUTIONAL amendment that would force Spain’s government to keep its deficit low cleared its first hurdle in Parliament today.
Lawmakers in the lower chamber agreed to formally debate the amendment and cast their votes on Friday. The tally of Tusday’s vote was 318 in favor, 16 against and two abstentions. The result was expected because the amendment is supported by both main parties — the ruling Socialists and opposition, centre-right Popular Party.
Once the bill is passed, it goes to the Senate next week.
The goal of the amendment is to enshrine budgetary discipline in the constitution and reassure markets that economically struggling Spain will keep its state finances under control.
Spain is fighting to recover from nearly two years of recession prompted largely by the collapse of a real estate bubble and a credit-fueled consumer spending spree. The jobless rate is near 21 per cent — almost 45 per cent for young people — and economic growth remains anemic.
Spanish bond yields — a direct measure of how jittery investors are about a country’s debt — soared to record levels early this month, and came back down only after the European Central Bank intervened and bought billions in Spanish bonds on the secondary market.
In Tuesday’s debate, Socialist party spokesman Jose Antonio Alonso said the constitutional amendment was the best way to dispel doubts over Spain’s solidity and reliability.
“Spain pays its debts and there should be no doubt about this,” Alonso said.
The amendment enshrines the principle of budgetary discipline into Spain’s constitution, but does not specify numbers. These will come in a separate law that is to be passed by June 2012. The two main parties have agreed the law will stipulate that Spain’s deficit cannot be exceed 0.4 per cent of GDP but this threshold will not take effect until 2020.
Labor unions say Spain is caving into market pressure and have convened street rallies this week to protest the amendment. The main one will be next week in Madrid.
Germany, which passed a similar constitutional amendment in 2009, praised Spain’s action.
“The fact that Spain is inserting a ‘debt brake’ in its constitution today is an encouraging sign that more and more European countries are prepared to go down this road of good sense and tackle the problems at the root,” Chancellor Angela Merkel said during a visit to Slovenia on Tuesday.
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